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KEY MESSAGES
The Future of EU Free Trade
Agreements: European dialogue
in light of the EU-MercosurAssociation Agreement
Klaudija Cremers, Yann Laurans & Tancrède Voituriez (IDDRI)The trade policy of the European Union (EU), vis-à-vis the inclusion of environmental concerns, is in a form of deadlock. In response to a rising pressure for a better inclusion of sustainable development in
the EU's Free Trade Agreements (FTAs), a "Trade and Sustainable Development" (TSD) chapter has beenadded, starting with the EUSouth-Korea FTA in 2011 and initiating a series of "new generation" of FTAs.
Recent EU "new generation" FTAs (Transatlantic Trade and Investment Partnership, TTIP; Comprehensive Economic and Trade Agreement, CETA) have been heavily scrutinised by the public and encountered increasing difculties in the process of adoption by national Parliaments. The association agreement between the EU and the Mercosur trade bloc (EUMercosur), nalised in June 2019, made no excep- tion: its TSD chapter and its provisions mentioning the Paris Climate Agreement were not deemedsufcient for many European authorities. It might nevertheless initiate a new phase in the design of the
European trade policy vis-à-vis sustainable development. This Study provides an overview of recent developments at a European national level on EU FTAs, and in particular on the ongoing EUMercosur trade discussions, and aims to provide a rst exploration ofwhether the changing political perspective in these countries on EU FTAs are a temporary trend or whether
there is a window of opportunity to make EU FTAs more focused on sustainable development in the future.
The recent changes in European political balances
are key explanatory factors of European posi- tions hostile to the EUMercosur agreement "as it stands". The "greener" colour resulting from dif- ferent election outcomes explains the majorities or coalitions opposing the agreement under nego- tiation on environmental terms. It also resulted in new sustainable development commitments by the European Commission through the EuropeanGreen Deal, making it difcult for the European
Commission to sign a FTA which would not explic-
itly improve signatory countries' climate and envi- ronmental performance.The agreement has brought together hitherto
uncommon political interest groups, namely those 1) traditionally sensitive to agricultural problems, 2) those that are sensitive to environmental issues and 3) those that are concerned about the envi- ronmental consequences of FTAs. This type of blockage could arise for a large part of future FTAs as long as third countries are not exemplary in environmental terms, and where the agreement provides for European imports of agri- cultural products.In order to exercise a form of environmental
diplomacy via access to the European market, the Union's main effective international power, the EU must offer its partners agreements that are sufciently attractive for their signature to be sought in the future.Several avenues for the development of future
FTAs can be envisaged, including the introduc-
tion of environmental clauses in the agreements themselves rather than by reference to multi- lateral environmental agreements, designing of investment agreements to promote sustainable development, and adopting internal European regulations to exclude, without discrimination, agricultural products resulting from the degrada- tion of land and remarkable ecosystems.N° 02
February
2021STUDY - 3 -
The Future of EU Free Trade Agreements: European dialogue in light of the EU-Mercosur Association Agreement
1. INTRODUCTION ________________________________________________________________________
____________________ 52. EXECUTIVE SUMMARY ________________________________________________________________________
__________ 6 3. BACKGROUND ________________________________________________________________________ ______________________ 74. POSITIONS IN THE EUROPEAN UNION AND IN THE MERCOSUR ______________ 9
4.1. France ....................................................................................
.................................................. 94.2. The Netherlands ........................................................................................................................
..................................................................... 094.3. The Franco-Dutch trade alliance .......................................................................................................................
............................. 0104.4. Ireland ....................................................................................
.................................................. 0104.5. Belgium ....................................................................................
................................................... 0114.6. Luxembourg ........................................................................................................................
............................................................................... 0114.7. Austria ....................................................................................
................................................... 0114.8. Germany ....................................................................................
.................................................. 0124.9. Spain and Portugal ........................................................................................................................
............................................................... 0124.10. Sweden ....................................................................................
.................................................. 0134.11. The European Commission ........................................................................................................................
.......................................... 0134.12. The European Parliament ........................................................................................................................
............................................ 0134.13. European Civil society ........................................................................................................................
..................................................... 0144.14. Mercosur governments ........................................................................................................................
.................................................. 0144.15. Mercosur civil society ........................................................................................................................
...................................................... 0145 ANALYSIS AND POSSIBLE FOLLOW-UPS ______________________________________________________ 015
5.1. Four possible reasons for a shift in the European mindset free trade agreements ........ 015
5.2. Possible follow-ups .......................................................................................................................
.............................................................. 016The Future of EU Free Trade Agreements:
European dialogue in light of the EU-
Mercosur Association Agreement
Klaudija Cremers, Yann Laurans & Tancrède Voituriez (IDDRI) - 4 - - 5 -The Future of EU Free Trade Agreements: European dialogue in light of the EU-Mercosur Association Agreement
1.INTRODUCTION
The trade policy of the European Union (EU), vis-à-vis the inclusion of environmental concerns, is in a form of deadlock. In response to a rising pressure for a better inclusion of sustain- able development in the EU's Free Trade Agreements (FTAs), a "Trade and Sustainable Development" (TSD) chapter has been added, starting with the EUSouth-Korea FTA 1 in 2011 and initiating a series of "new generation FTAs". These chap- ters typically organise channels of dialogue among signatories to address, based on expertise and working groups, the envi- ronmental concerns that may arise. In the ratication process, which may involve the European Council, the European Parlia- ment and national Parliaments, this allowed reaching an agree- ment and a positive or unanimous vote. This was the case for a series of agreements that did not attract much attention of the general public, such as the EUJapan trade agreement, 2 and whose negotiations happened as protection against globali- sation was not as much a concern as it is today in European opinions. However, recent EU "new generation" FTAs with the United States (Transatlantic Trade and Investment Partnership, TTIP) and Canada (Comprehensive Economic and Trade Agreement,CETA) have been heavily scrutinised
3 by the public and encoun- tered increasing difculties in the process of adoption by national parliaments. The association agreement between theEU and the Mercosur trade bloc (EUMercosur),
4 announced by the Juncker Commission just before the termination of its mandate, most probably initiates a new phase in the design of the European trade policy vis-à-vis sustainable develop- ment. Its TSD chapter and the provisions of the agreement mentioning the Paris Climate Agreement on climate change 1ALL/?uri=OJ%3AL%3A2011%3A127%3ATOC
2 https://trade.ec.europa.eu/doclib/press/index.cfm?id=1684
3 4 The four current members of the Common Market of the South (Mercosur) areBrazil, Argentina, Uruguay and Paraguay.
were not deemed sufcient for many European authorities, who expressed, even before the rst step of its adoption was complete, their reluctance to adopt it. This expression of concern, even in traditionally trade-sup- porter countries such as the Netherlands, is the starting point of an interrogation, which this study intends to address: does the opposition to the EUMercosur FTA mean that a new phase in the EU trade policy has begun? Moreover, to address this question, we have to assess how deep, and on what grounds, this opposition stands. Does this reaction indicate a change that will last and force a modication of the European trade policy, or is it based on a conjunction of transient occurrences? This study provides an overview of recent developments at a European national level on EU FTAs, and in particular on the ongoing EUMercosur trade discussions, and aims to provide a rst exploration of whether the changing political perspectives in these countries on EU FTAs are a temporary trend or whether there is a window of opportunity to make EU FTAs more focused on sustainable development in the future. It draws conclusions regarding the perspectives opened by the current situation and the "EUMercosur agreement political sequence".For this study, we have conducted interviews with
researchers, civil society and business representatives as well as sustainable trade experts at a government and EU level in Austria, Belgium, France, Germany, Ireland, the Netherlands, Spain and Sweden. The key recommendations also follow from a seminar that IDDRI organised on November 27, 2020. The authors wish to thank the following people for their invaluable input and feedback: Franz Sinabell (Austrian Insti- tute of Economic Research), Cristina Monge and Iñaki Arto (BC3), Eleonora Catella (BusinessEurope), Amandine van den Berghe and Clotilde Henriot (ClientEarth), Philippe de Buck (Consultant), Rem Korteweg (Clingendael), Hélène Perier (DG Environment), Paolo Garzotti (DG Trade), Josep Puxeu (European Economic and Social Committee), Clara Brandi and Svea Koch (German Development Institute), Lorenzo Cotula (International Institute for Environment and Development), Álvaro Schweinfurth and Maria Torres (Spanish Confederation of Employers' Organizations), Kevin Adams, Toby Gardner and Frida Lager (Stockholm Environment Institute), Kåre Johard - 6 - (Sweden Development Agency), Laurens Ankersmit (Univer- sity of Amsterdam), Michel van Winden (Oxfam Novib), Alan Matthews (Trinity College Dublin), Mathilde Dupré (Veblen Institute) and Julia Grübler and Oliver Reiter (Vienna Institute for International Economic Studies). This project is nanced by the European Climate Foundation, but does not necessarily reect its views. 2.EXECUTIVE SUMMARY
The European public is increasingly scrutinising European free trade agreements (FTAs) with respect to their impact on sustainable development. In response, and since the EUSouth Korea FTA in 2011, FTAs have been complemented with a "Trade and Sustainable Development" (TSD) chapter, that intends to address these concerns by providing means for bilateral dialogue. However, such a dialogue platform rests on shared goodwill, since it does not possess enforcement power per se. Nonetheless, global economic competition is not slowing down, and, especially when FTAs involve agricultural products, bilateral trade is often and increasingly viewed more on its down side than on the bright side. Hence, with the Transatlantic Trade and Investment Partnership (TTIP) and the Comprehen- sive Economic and Trade Agreement (CETA), contestation over the possible agro-economical, environmental and sanitary impacts of new FTAs have risen considerably, and ratication by domestic parliaments has proven to be a difcult task. The projected association agreement with the Mercosur common market (Brazil, Argentina, Paraguay and Uruguay), announced in June 2019, has started a new political sequence. Fuelled by the roaring res in the Amazon and the rather aggressive position taken by the Brazilian head of State in response to the questioning of his pro-deforestation policy, European negative opinions have turned hostile and led to a series of negative positions expressed by European national Parliaments, heads of State and the European Parliament against the proposed FTA, even before the ratication ques- tion was ofcially raised in the Council. This now obliges the European Commission to think of what amendments to the Mercosur FTA could be designed so as to reassure the various European parties who have expressed their scepticism, while being considered acceptable, if not an improvement, by theMercosurian countries.
This report probes into this new "European mindset" and surveys the political and economic reasons why such reac- tions appeared, in order to understand whether this situation might last, be applicable to future FTAs, and what could be the perspectives and the approaches to solving blockages. It starts from the point of view that European bilateral trade agreements can or could be powerful instruments to help align third countries with EU's advanced norms on sustainable development. The survey of a series of European experts and represent- atives, focusing on the votes of national parliaments and the public positions of heads of State, delivers a relatively clear conclusion. Two groups, or blocs, are traditionally opposed to trade liberalisation agreements, and this is no exception in the case of Mercosur: farmers exposed to agricultural imports, and the political representatives who support them, as well as anti-globalisation, or anti-growth, views for whom any instru- ment to increase or ease trade is counterproductive. In most countries, and in the European Parliament, it is the conjunction of these two groups of opinion, with the growing strength of the environmentalist vote, which explains the a priori rejection of the EUMercosur agreement "as it stands". In some coun- tries (e.g. the Netherlands and Austria), opposition from some farmers is in itself relatively new. In most of the others, and in the European Parliament, it is the importance given to environ- mental issues by voters, not only those voting green but also those favouring centrist parties (as they increasingly take into account green issues in their programmes), which explains the majorities or coalitions opposing the agreement under negoti- ation with a region that includes a country whose government openly favours deforestation, and whose economic players do not yet offer guarantees of traceability and control that would make it possible to attest to the non-participation of Euro- peans in the deforestation or pollution of third countries. This state of affairs is rather likely to last, as the envi- ronmental, sanitary, human rights and labour conditions concerns are unlikely to abate, either thanks to an earnest and universal care for the sake of the planet and humanity, or based on a need for protection for European activities submitted to stringent domestic regulations, or as excuses for protectionist positions. As a result, this type of blockage could arise for a large part of the FTAs, which will be negotiated in the coming years, as long as third countries are not perfectly exemplary in environmental terms, and where the agree- ment provides for European imports of agricultural products. Indeed, the Brazilian-dominated Mercosur partner seems to tick all the possible unfavourable boxes in the eyes of many European political, economic and opinion groups. Neverthe- less, the general concerns with regards to international trade and globalisation are now so high on the political agenda that it is uncertain whether future agreements with Australia, South-East Asian, Central American and maybe African coun- tries would pass the ratication process by European national parliaments, if not by the heads of State in the Council. In order to exercise a form of environmental diplomacy via access to the European market, the Union's main effective international power, the EU must however offer its partners agreements that are sufciently attractive for their signa- ture to be sought in the future. Finally, the report proposes a number of avenues for the development of FTAs, which attempt to respond to this paradox. These include the intro- duction of environmental clauses in the agreements them- selves rather than by reference to multilateral environmental agreements, designing investment agreements to promote sustainable development, and adopting internal European regulations to exclude, without discrimination, agricultural products resulting from the degradation of land and remark- able ecosystems. - 7 -The Future of EU Free Trade Agreements: European dialogue in light of the EU-Mercosur Association Agreement
3.BACKGROUND
After 20 years of negotiations, an "agreement in principle" was reached between the EU and the Mercosur countries on 28June 2019.
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